What a saturated market is and how to stand out

A market gets saturated when the number of businesses providing a particular type of product or service meets or exceeds the amount of demand.

If a town has 5 grocery stores that are profitable right up until a sixth one opens, that’s the point where the local grocery market has become saturated. Market saturation can occur locally (as with our coffee shop and grocery examples), nationally or globally. If global smartphone companies, for instance, reach the point where everybody already owns a smartphone, they hit a saturation point and have to consider other ways to keep making sales, such as offering upgrades to new models.

Once your market becomes saturated, business challenges start to have higher stakes. If you want your business to remain successful over the long term, you should be prepared to address a few main obstacles:

When more companies come onto the market, you have to work harder to set yourself apart and convince customers your business is worth choosing. This can already be difficult with one main competitor, but if the list expands to 4 or 5 (or more), you’ll have to continually look for unique ways to rise above all the competition.

The more competitive your market is, the more important it is to stay on top of trends in consumer behaviour. That includes consumer preferences that directly relate to your product or service category (for instance, a clothing retail store needs to be aware of current fashion trends). It also includes broader changes in how consumers shop and behave. If a growing portion of your audience likes communicating by text and you insist on email, it could make their decision to switch to a competitor that much easier.

Adopting new, useful technology products can be a smart way to stay ahead of the competition – unless they get there first. Companies in a competitive market should strive to stay aware of emerging technologies that can make the business more efficient, help save money, and/or improve the customer experience. You wouldn’t want to be the last pizza place in town to offer e-commerce options for delivery and pick-up.

Selling in a saturated market makes your job harder, but it’s not an insurmountable challenge. Several smart strategies can help you stand out and win the business and loyalty of customers:

The first step in setting yourself apart in a crowded market is understanding who your competition is. Learn everything you can about your competitors, including:

• Reviewing their website to see what products they offer and how they talk about them
• Analysing how they position themselves in the market
• Making note of the marketing channels and tactics they use
• Reading customer reviews and monitoring social mentions to understand what customers think of them

When you understand where each of your competitors fits into the industry landscape, you can identify gaps in the market. Try to discover marketing channels they’re not using yet and features you offer that no one else does. And pay attention to any complaints you see about their company. If you can find tangible ways to improve upon the experience they offer, you can capitalise on that.

Use your competitor research to craft a unique selling proposition. What makes you special enough that customers should choose you?

A coffee shop might position themselves as the most ethical choice in town by using only fair trade coffee and sustainably sourced ingredients, or they could decide to be the gourmet option by investing in fancy espresso machines and training baristas in foam art. You don’t have to win over everyone; focusing on a specific audience and creating a business that appeals to them can win you enough customers for success.

One of the most straightforward ways to compete with other businesses in your space is on price. No business wants to drop prices to win customers, but if your prices are notably higher than the other options, many customers will go with the more affordable choice. But you don’t necessarily have to be the cheapest to win business. Here are a few strategic pricing strategies you can consider:

• Offer different pricing levels. You can offer good, better and best options that are priced accordingly. That helps you keep the customers who are willing to spend more for the higher level of product while attracting price-conscious consumers who are more interested in getting a deal.
  
  
• Run introductory discounts to attract new customers. You can run promotions to get first-time customers at a special rate, then win their loyalty with great products and customer service.
  
  
• Position your business as the top-tier option. If you position yourself as the highest-quality option (and consistently deliver on that promise), you may be able to attract customers who are willing to pay more than they would at competing establishments. Fine-dining establishments charge prices much higher than fast-food restaurants in the same town but can still bring in customers if the food and experience are good enough.

Whatever niche or strategy you choose in order to differentiate yourself in the market, it’s crucial that you effectively communicate that difference to your audience. That’s where marketing and advertising come in. Identify the most valuable marketing channels to invest in. That may include:

• Establishing a presence on popular social media apps
• Partnering with relevant influencers to expand your reach
• Creating content that demonstrates your expertise and provides value to your audience
• Trying out different types of digital advertising like search engine ads, social media ads and affiliate marketing

Across channels, emphasise your unique positioning and brand personality. You want to create a strong-enough brand presence in consumers’ minds that you won’t be easily confused with any competitors in your space.

Another smart strategy to offset market saturation is to expand your product offerings. Brainstorm complementary products or services that fit well with your current brand but set you apart from your closest competitors. If a bakery notices sales dropping after a similar business opens nearby, they could add a variety of ice cream flavours to their offerings. Ice cream pairs well with pastries and attracts new customers who wouldn’t normally seek out a bakery on a hot day.

Providing an exceptional customer experience is a powerful way to differentiate your business from others in the space. According to a 2023 Salesforce report, ‘80% of customers say the experience a company provides is as important as its products and services’. That requires thinking about every aspect of the customer journey: from when a customer first hears about your brand, to the purchasing experience (online and off), through to how you handle any issues that arise.

Consider how to offer the kind of experience that builds customer loyalty. Try to create a comfortable, pleasant in-store experience. Train employees to treat customers with respect and compassion. And consider offering on-demand delivery options – something customers greatly value. In a 2023 Uber survey, 94% of consumers said a good delivery experience makes them more likely to order from a business again, and 92% said a positive experience makes them more likely to recommend that business to others. If you use a white-label delivery service, you can even keep the delivery experience under your brand, making it a smart way to boost customer sentiment about your business.

The customer experience is made up of many factors. Look for as many different ways to add value to customers as you can. That may include:

• Offering warranties or money-back guarantees to show customers you stand behind your products
• Launching a loyalty program that rewards customers for choosing you
• Improving convenience by creating an easy checkout process on your website, accepting various payment methods and offering options for pick-up and delivery
• Soliciting customer feedback and implementing changes based on what you learn

If you consistently deliver an impressive experience to your customers, they may not see any reason to give your competitors a try. Building a business that puts customers first is one of the smartest ways to stay competitive, no matter how saturated your market is.